(Climate Central) – The insurance industry had its third-most expensive year on record in 2012, with global economic losses from natural catastrophes and manmade disasters totaling $186 billion, according to a report released March 27 by the reinsurance giant Swiss Re. The total insured losses for the year was $77 billion, which was well below the losses seen in 2011, when earthquakes and flooding in Asia caused insured losses of $126 billion, which were the highest on record.

According to Swiss Re, extreme weather events in the U.S. dominated the list of the most expensive disasters of 2012, with Hurricane Sandy alone costing an estimated $70 billion in total damage and $35 billion in insured losses. In addition, the prolonged U.S. drought and summer heat waves resulted in insured agricultural losses of $11 billion, which was the highest loss in the history of agriculture insurance.

According to Swiss Re’s data, nine of the world’s top 10 most expensive insured loss events of 2012 occurred in the U.S. That is explained by the country's widespread use of insurance and the prevalence of extreme weather events in 2012, which was the hottest year on record in the lower 48 states. Out of the $119 billion in total economic losses in the U.S. during the year, Swiss Re found, more than half, or $65 billion, was insured. That amounted to about 0.68 percent of U.S. GDP for the year.

In recent years, the insurance industry, including Swiss Re, has been warning of its increasing exposure to climate change-related increases in extreme weather events as well as the effects of sea level rise. Scientific research has shown that global warming has already increased the odds of some types of extreme events, such as heat waves and heavy precipitation events.

The report found that a 10-inch rise in global average sea levels by 2050 would nearly double the probability of extreme flood losses. “For the industry, this means that a $20 billion insured loss event, now expected once in 250 years, would be expected once in 140 years,” Swiss Re said in a press release. A 10-inch increase in sea level by 2050 is considered to be a conservative estimate, since it does not include the effects of a potentially rapid melt of land-based ice sheets in Greenland and Antarctica, Swiss Re said.

"So even without considering how climate change may affect future hurricane frequency or severity, the impact of sea-level rise alone is likely to be significant for both those seeking and those providing insurance protection," the report said.

According to Matthias Weber, Swiss Re’s group chief underwriting officer, Hurricane Sandy may be a preview of what’s to come as rising seas make future coastal storms more destructive. “Sandy challenged the industry with its combination of record wind field and storm surge,” Weber said in a press release. “The possibility that such events could increase in frequency and strike densely populated regions such as the northeast U.S. means that extreme storm surges need to be more thoroughly understood.” [more]